OVERVIEWPrepaid funerals are relatively uncommon in New Zealand. Only 4 per cent of funerals here are prepaid. Compare this to 50 per cent in the United States and 13 per cent in Australia. However, in the United States, the tradition of prepaying for your burial plot makes it opportune to also prepay your funeral costs. One tradition has given rise to another. A similar scenario is developing in Australia.
Whilst it may have a small following at present, the concept of prepayment for funerals in New Zealand is growing as more people realise the benefits of the peace of mind it gives them. It saves their loved ones a lot of anguish at a time of grief. They don't have to worry about finding the money to pay for a funeral when the deceased's estate is still frozen pending probate. In fact, the law in New Zealand is such that funds to cover funeral costs can be withdrawn from an estate prior to probate. (This is about the only exception there is to the rule that money in an estate cannot be touched until probate is granted by the High Court.) Notwithstanding, there can be anxiety about paying for a funeral. Many funeral directors offer a very worthwhile discount for prompt payment. In order not to miss out on the discount, the account must be paid before the deadline - which would almost always be before date of probate.
The Funeral Directors Assciation of New Zealand (FDANZ) offer a scheme that caters for people wanting to prepay funeral expenses in conjunction with a particular funeral director. The FDANZ scheme works on the basis of your payments being used to pay a life insurance policy. The insurer is Sovereign Life (New Zealand). The funds paid out on the policy on death are used to pay the funeral costs. The FDANZ Family Bereavement Plan emphasises your specific wishes as to your funeral arrangements. It is usually put in place through a particular funeral director and involves a face-to-face meeting where such things as caskets, coffins, readings, hymns, venues, flowers, catering, memorials, and more are discussed. Whilst pre-arrangements will involve that funeral director, they can subsequently be carried out by any other funeral director in New Zealand, so long as they are members of the FDANZ. In essence, this scheme prepays for a specified type of funeral. You are guaranteed that all the specified arrangements will be adhered to, despite any inflation that may have occurred since when you first paid.
Wellington-based Prepaid Funerals New Zealand Ltd operates differently in that they receive your payment and hold it in trust until such time as a funeral eventuates. When that time comes, the funds can go to any funeral director anywhere, even overseas. This flexibility is seen as a major advantage. The money is invested from the time that it was originally paid in. The nest-egg may more than cover funeral expenses. Any surplus goes back to the estate and is distributed to the heirs.
An even more compelling reason for New Zealanders to arrange a prepaid funeral trust is that the funds in the trust are exempt (up to a maximum of $10,000) from the asset test the Government uses to decide if an elderly person qualifies for a rest home subsidy (Residential Care Subsidy). For example, let's say you are a single, elderly person. If you have assets over $180,000, you may have to spend the excess on rest home fees until your assets fall to the $180,000 threshold. At death, your estate will be left with $180,000. Say $6,000 is needed to cover funeral costs, then $174,000 is available to bequest to your heirs.
If you had a prepaid funeral trust of $10,000, the scenario would be a little different, certainly more beneficial to your heirs. At death, your estate may be left with $190,000 including the value of the funeral trust. Say $6,000 is needed to cover funeral costs, then $184,000 is available to your heirs ($180,000 plus $4,000 surplus left over from the prepaid funeral trust fund ). It is simply a case of whether you want your beneficiaries to have the extra money ($10,000), or do you wish to spend it on rest home fees?
These facts came into play on July 2005. The situation improves by $10,000 every year as the Government has instigated an annual increase of $10,000 in the qualifying threshold asset value. Despite the increasing threshold level, the fact still remains that up to $10,000 can be "preserved" for your heirs by having a prepaid funeral trust.
Have you got questions to ask about prepaid funerals? If so, e-mail Phil Congreve (Principal of Prepaid Funerals New Zealand Ltd). phil@cfsl.co.nz
Other sources of information on prepaid funerals in New Zealand:
Funeral-Link's pre-paid funerals website: http://prepaidfunerals.co.nz/
Funeral Directors Association of New Zealand. The Family Bereavement Plan.
Griefcare. Press here
Grey Power Information. Press Here
Marsden House Funeral Service. Press here
Citizens' Advice Bureau. Press here. (13-page pdf file/booklet on funeral planning – useful!)
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| This page updated 6th September 2008 |
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